Ethiopian Airlines’ deal will cripple aviation industry – Experts

The Minister of Aviation, Hadi Sirika, had at a media event held on September 24, 2022, in Abuja, informed the public that at last, the Federal Government had selected 76-year old Ethiopian Airlines Consortium as the preferred bidder for Nigeria Air.

This was barely four years after Sirika unveiled the name and logo of the proposed national carrier at the Farnborough International Airshow, London. Even though  ET was the only bidder that indicated interest in the project, the Federal Government didn’t have other options to choose from.

The Ethiopian Airlines is the largest aviation company in Africa and is reported to be one of the most profitable airlines in the world with about 20-25 per cent annual growth. In 2021/2022, it made a net profit of $937 million and generated $5 billion revenue.

Many stakeholders are left wondering if the rules/laws guiding the nationality clause which states in part that “…any airline from a state must be substantially owned and effectively controlled by nationals of that state…” does not apply in the case of Nigeria Air.

Analysts are asking whether it would not be right to say that the airline, as currently contrived, is not owned by Nigeria

This is because it is over 50 per cent owned by foreign nationals and as such the NCAA, ordinarily by law, cannot grant it an operating licence.

The Aviation Minister had, in Abuja, revealed that SAHCOL and MRS were holding separate shares of 46 per cent, with the Federal Government owning 5 per cent.  Experts wonder why ET is submitting its bid as a consortium to include both SAHCOL and MRS. They say that it amounts to a duplicity of shares, which invariably translates to SAHCOL and MRS holding more than 46 per cent shares in the new company, Nigeria Air.

Analysts calculate that if anyone adds their part of the consortium with ET already holding 49 per cent, then their shares could be more than 46 per cent.

Since ET’s 49 per cent stake was made public, many industry experts have strongly expressed discontent with the model, saying that having a competitor as a major shareholder in the country’s national carrier would completely annihilate Nigerian airlines.

Also, many believe that the partnership would only help Ethiopian Airlines achieve its target to dominate the African market as it had formed similar agreements in eight other African countries. Checks have revealed that MRS is 60 per cent owned by foreign entities, which presupposes that any shares held by MRS in the new Nigeria Air would only be 40 per cent Nigerian because it is substantially foreign- owned.

As a result of this, experts wonder if the new Nigerian carrier can be said to be Nigerian with the ownership structure.

Domestic airlines, under the aegis of the Air Operators of Nigeria, have expressed concerns over the proposed partnership between the FG and ET to form a national carrier scheduled to begin operations by December.

The spokesperson for AON and Chairman of United Airlines Nigeria, Prof Obiora Okonkwo, spoke during an online aviation town hall meeting  titled, “Nigeria Air: The Solution to Nigeria’s Aviation Problems?”

The event was organised by aviation consultancy firm, Avaero Capital Partners.

He said, “We have not seen anything Nigerian in this Nigeria Air. It is a camouflage of interest. The decision to set up a national carrier in partnership with Ethiopian Airlines is a policy somersault. The people in government have continued to demonise the local operators. Aviation companies have collapsed in other parts of the world, not only in Nigeria. What the aviation sector needs is support. The private sector will collapse with this (national carrier) arrangement. Nigeria will be losing much. It must not be allowed to be sustained. There is nothing Nigeria in this Nigerian Air.”

The Managing Director of Top Brazz Aviation and former Managing Director of the Nigerian Airspace Management Agency, Roland Iyayi, said the proposed national airline would help Ethiopian Airline achieve its domination of the African market as the carrier had formed similar agreements in eight other African countries.

Iyayi said, “This approach will decimate the local market. Agreement with Ethiopian Airlines will create sabotage. Ethiopian Airlines will come into our domestic market, lower fares (non-competitive fares) with the aim of taking over the market. The choice of Ethiopian Airlines will destroy our industry. We reject this totally.

“In anticipation of the Single African Air Transport Market, Ethiopian Airline wants to dominate the African market. The government is meant to support local carriers. Ethiopian Airlines has partnerships in eight other countries in Africa.

“ET currently has 135 planes. The CEO of the airline has said its plan to increase their fleet to 250 planes in the next five years. The intent is to go into the domestic market of all the African countries where they have footprints. This is simply aviation colonialism. If we take all of this onboard, you will wonder whether the government has the interest of Nigerian airlines at heart or not.”

Also speaking, President, Aircraft Owners and Pilots Association of Nigeria, Mr Alex Nwuba, said with Ethiopian Airlines having 49 per cent stake in the proposed national carrier, it would be difficult for Nigerian Air to fly intercontinental routes.

Nwuba, a former managing director of Associated Airlines and a pilot, said, “We do not think this is the best thing happening. It is not genuine. We reject it. Nigeria Air will not suffer any fate different from what befell the defunct Virgin Nigeria that could not go to the United States. This is clear in the Bilateral Air Services Agreement regulations.”

The aviation expert also queried why MRS and SAHCOL, listed as private investors in the proposed national carrier, had yet to inform their shareholders via the capital market their decision to invest in Nigeria Air.

“MRS and SAHCOL have yet to put up statements at the capital market to inform shareholders that they will be putting some money in the national airline. This is unethical,” he added.

In his contribution at the webinar, an aviation expert, Simon Tumba, said, “How can Nigerian Air consolidate the Nigerian market, African market and then the intercontinental market with this kind of arrangement? This project has personal interests. Every Nigerian must reject it. It shows that the project itself has issues. The private sector entities that have shown interest in Nigeria Air have yet to report this at the capital market. It is unethical.”

A former Acting Director-General, Nigerian Civil Aviation Authority, Benedict Adeyileka, said, “Nobody has mentioned the interest of Nigerian professionals. We have local operators that can operate. I am completely against Ethiopia Airlines as a partner, while I am in support of the establishment of a national carrier.”

Also, the Chief Executive Officer, Sabre Network, an airline global distribution network, Gabriel Olowo, said the government should simply remove ‘national’ and call its deal with Ethiopian Airlines, a flag carrier.

Olowo added, “In aero-politics, how much support does the Nigerian government give our carriers to go on foreign routes? There is nothing national about the so-called national carrier. They should remove the word ‘national’ carrier and call it a flag carrier, and then create a level-playing field for everyone to compete.”

Also speaking, a former Military Commandant of the Murtala Muhammed International Airport, Group Capt John Ojikutu (retd), said, “We have tried in the past to have national carriers but failed. We should simply reduce multiple designations to foreign airlines and create more markets for domestic airlines. We need just two flag carriers.”

Aviation industry analyst, Mr Wole Shadare, however, insisted that there was a need to give the government a chance to promote the deal, advising the Ministry of Aviation to review its plan.

An aide to the Ministry of Aviation, Mr James Odaudu, said that the government was on course to set up the carrier, adding that one of the three leased planes would arrive in the country for demonstration flights in a couple of weeks.

According to him, the government was planning a dry lease of aircraft contrary to reports that the government was proposing a wet-lease arrangement.

Capt. Roland Iyayi, who spoke on behalf of AON at a recent hearing by the House of Representatives in Abuja, said it was Ethiopian Airline that would benefit most from the Nigeria Air deal.

Iyayi said, “Ethiopia will not help you to create an aviation hub when it has one in Addis Ababa. They are building a new airport. It will be very difficult to see how Ethiopia will commit to a national carrier in Nigeria that will be for the benefit of Nigerians. We dare to say, as AON, that if airplanes are brought into the Nigerian market, the first thing Ethiopia will do, as a strategy, is to do a fare-cutting strategy for market penetration. When you cut the fares to compete with the local carriers, Ethiopia is awash with cash. They can afford to come to the market and project a six-month fare with domestic carriers.

“I can guarantee you that if they do that for six months, 90 per cent of Nigerian airlines will be out of business. Afterwards, they will now dominate the domestic market through their monopoly. What happens when they increase the fare? Ultimately, Ethiopia will fly international; it will be flying on Nigeria’s designated routes.”

Article first published on the Punch Website

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